Business Strategy level > INTERNAL ANALYSIS:

-> REFERS TO: company values, goals, organizational structure, systems and activities, resources and competences.

-> OBJ: Cost and values differentiation and define Strength and Weaknesses;

• Assess the SBU CA concerning Cost and Value.

-> PROSPECTIVE: internal to the company.

-> METHOD:

• Porter’s Value Chain Model.
• Core Resources and Competencies approach.

Value Chain Model:

-> DEF: method to support the internal strategy analysis process;

• Mcheal Porter, Competitve Advantage 1985.

-> IDEA: we don’t have to consider the company as a black box.

⚠S and W are lead by company’s structure.

-> A company’s source of cost/value competitive advantages depend on:

• The overall system of activities (boundary);
• The single significant activities;
• The links between activities.

-> The value chain is referred to a specific SBU.

-> Index:

• Three levels;
• Competitive Advantage:
• Activities;
• Principles;
• Model’s Limitation;
• Generic Strategy.

The Three levels to act:

• Signle activities;
• Links between external and internal activities;
• Overall system of activities (Vertical Integration);

-> Focus on:

• Single Activities:
  • Cost Drivern or
  • Value Driven;
• Link Between Activities
• System of Activities > Vertical Integration.

-> Going Deeper.

Competitive Advantage:

-> We focus on:

• COST competitive advantage;
• VALUE competitive advantage;

COST competitive advantage:

-> Cost CA and Economic value:

-> Divide in:

• Specific Activities;
• Links Between Activities;
• Overall system of activities;

VALUE competitive advantage:

-> OBJ: making the product/service unique for the customer.

• Quality: product’s nominal performances, but also effective performances
• Time: both for what concerns delivery time and time to market
• Service: both incorporated with the product or complementary
• Variety/customisation: fullness of the array of products and level of personalisation
• Reputation: both of the firm and of the brand

-> Value CA and Economic Value:

-> It depends on:

• Single activities;
• Links between activities;
• Overall system of activities;

Activities:

• PRIMARY ACTIVITY: create value for the customers, transforming directly the input in output.
• SUPPORT ACTIVITY: have no direct impact in the transformation of the input in output, but they are crosscutting and enabling process.

Principles:

1. COMPANY-SPECIFIC MODEL: the VC is specific for the company analyzed;
2. INDUSTRY-SPECIFIC: refers to a specific strategic business unit working in a specific BA;
3. FLEXIBLE: can be adopted to other services => Primary and Support Activity can be remodel.

-> When remodeling a VC remember that the following features have to be true:

• Extenction Primary and Support Activity;
• Looking for a Cost and Value differential;
• Identify Positive and Negative differenthial throught the three levels of analysis (before discussed);

Model’s Limitations:

-> The VC has some limitations:

❌LIMITATION	✔SOLUTION
Manufactoring oridented	Adjusting and costumize the model (for the specific company);
Linear vision of company’s activities, B2B relationship;	Value network analysis;
Little focus on international resources and competences;	Resource-based view of the firm;

Generic Strategies:

-> Micheal Porter propoese an alternative to SWOT: the Generic Compeititive Strategies;

-> They can be distigued by:

• Type of Advantage: Cost Advantage (Efficiency) or Uniqueness & Value (Effectiveness)
• Competitive Scope: Overall Market or Target Segmentation;

-> Cost leadership strategy is the union of the type of advantage and competitive scope.

FOCUS STRATEGY: if we find clusters of customers.

-> Porter trhought that these strategy can not be pursued at the same time.

-> Using the Porter’s Generic Strategies and the Strategic Alternatives we can create the BUSINESS MODEL.

Resource and Competence-Based View:

A critique of Positioning School:

-> Positioning School focus on:

• Spotting most attractive BA (external analysis) and…
• Shaping the right competitive positioning in such BA (internal analysis).

-> However:

• CA does not come only from competitive positioning;
• The focus strategy cannot be placed outside of the company’s boundaries (outside-in approach);
• PS leads to a distorted vision of company’s organizational structure (SBUs are separated and fully devoted to cover BAs, “Tyranny or the SBUs” (Hamel, Prahalad, 1990))

=>

Resource & Competence-Based View

-> DEF: Model that define the company as a unique pool of, tangible or intangible, resources and competences.

• If the resource doesn’t produce enought value for the customers is not a resource.
• The possession of the distinctive assets constitutes the basis of a company’s competitive advantage.
• Alternative for internal analysis;

CORE RESOURCE or COMPETENCE: area of specialiser expertise within the company, resulting from specific the harmonisation of complex technology streams and working activities, and which:

• Offers benefits to custumer;
• Is hardly imitable by competitors;
• You can leverage in a multitude of products and/ or markets.

-> Forms of Valuable Resources:

• Tangible, physical assets;
• Intangible asset;
• Derive from an organizational skill resident in the firm’s routines, processes or culture.

-> Instead of a portfolio of products, a company should seen as portfolio of competencies.

-> Those that (R & C) that influence the achievement of competitive advantage & determine how efficiently and effectively a company carries out its funcional activities.

RCBV Approach > 5 core test:

-> DEF: test to find out if a resource is core or not.

• Collins, Montgomery, 1995):
• Help a company to identify core resources and competencies

1. Inimitability: hard to copy, thanks to physical uniqueness, path

  dependency, causal ambiguity and economic deterrence

1. Durability: slowly depreciating
2. Appropriability: creating value that is easily captured by the firm
3. Non-substitution: not replaceable by alternative resources satisfying

  the same need

1. Competitive superiority: performing better than competitors’ resources

-> “Does this resource create an impact value for my customers?”

-> Competences should be in a very high level in company.

-> We can divide in tangible and tangible assets:

Strategic Business Unit vs Core Resource & Competence:

• Positioning School > CA: right strategic positioning of the company and on the chain of activities it performs (POV privilegs external analysis);

• RCBV > CA: stemming from the pool of distinctive core resources and competencies that the company developed, (POV internal analysis);

-> if Positioning School looks within a company’s boundary to identify strengths and weaknesses in the value chain => is looking for core resources and competencies;

-> if RCBV has little significance if deprived of link with external environment > Resources & Competencies can not be assessed if they are isolated.

-> Resource is valuable in a bicen BA and in a given timeframe.

VRIO Analysis

-> DEF: tool to find competitive edge by assessing businesses’ value resources & capabilities.

• value, Rarity, Imitability, Organization are the key success indicators for a business

-> Further reading;